The SNB Just Made $133,000,000 In One Morning On Its Apple Shares (Sort Of)

There’s been no shortage of discussion about the Swiss National Bank over the past couple of weeks.

I don’t want to turn this into an FX post, but long story short, they’re probably pretty pleased with the euro’s relentless appreciation against the franc, as the higher EURCHF climbs, the less they have to worry about intervening.

And indeed, they are still worried about franc strength. As Thomas Jordan recently put it, “we still consider the franc significantly overvalued, according to our models and indicators.”

Thanks to its efforts to weaken the franc, the Swiss central bank has amassed $750 billion in stocks, bonds and cash.

That has provoked a lively debate in Switzerland: What should the country do with all of that? And whose money is it, anyway?

For now, the Swiss National Bank holds on to it, and invests it around the world—but not in Switzerland. It held $2.7 billion in Apple Inc. stock, for instance, at the end of March. Some lawmakers and many economists think a sovereign-wealth fund created outside the SNB should invest a chunk at home.

This is a dynamic that is underappreciated by most market participants. As of March 31, the SNB owned 18,894,016 shares of Apple.

That’s up considerably from Q4 2016:

For reference, here are the bank’s other top holdings:

So you can see where the currency issue comes in here. They’re buying dollar and euro-denominated assets to keep a lid on franc strength, which means that profits from those assets are of course affected by the exchange rate.

“The SNB posted a first-half profit of 1.2 billion francs, a smaller-than-usual result as a stronger euro was offset by a weaker dollar. It also earns interest and dividends,” WSJ notes, in the same piece linked above. “The mother lode would come if the franc weakened more broadly and the SNB actually started selling its foreign stocks and bonds to prop the currency up, turning paper profits into real ones.”

Ok, so there’s that and it means we have to take the FX factor into account when doing our math, but in the interest of making this as easy to understand as possible in terms of communicating something about the size of these holdings, do note that the 18,894,016 in Apple shares the SNB owns means they would have made something like $133,00,000 this morning.

Writing about a subject is the best
way to educate yourself about it, and when I flick through past work I remember how much
they taught me, if no one else. Mainly they taught me that I didn’t know very much. But they
also taught me that most other people didn’t know much either. Thus, some key themes
which stand out include the illusory control of policy makers, the presumed knowledge of
those looking to them to actively do good, the ease with which we fool ourselves, and how
best to protect capital in the face of such unavoidable uncertainty. -- Dylan Grice